1986 (9) TMI 385

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.... the Nizam's Family Trust Deed dated May 10, 1950, can be aggregated in single assessment for each of the assessment years 1960-61 to 1965-66 ? (2) If the answer to the above question is in the affirmative, whether the assessments made under section 148 of the Act for the assessment years 1960-61 and 1961-62 were legal and valid ? " By a deed of trust dated May 10, 1950, the Nizam of Hyderabad created a family trust. A corpus of rupees nine crores in Government securities was transferred to the trustees under that deed. The corpus was notionally divided into 175 equal units. Five units were to constitute a fund called the " Reserve Fund " and 31 units were to constitute the "Family Trust Expenses Account". The remaining 166 1/2 units were....

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....hereinafter declared and contained of and concerning the unit or units of the corpus of the Trust Fund allocated to such relative of the settlor as aforesaid ". Clause 7 directs the trustees to hold 31 equal units of the corpus of the Trust Fund allocated to the Family Trust Expenses Account, and to apply the net income of that fund to the charges for the collection of the income of the Trust Fund and the remuneration of the trustees and of the members of committee of management and to other costs, charges, expenses and outgoings relating to the trust. There is a further provision. After all the other trusts constituted under the deed have been fully administered and carried out and the corpuses of all such units have been handed over and ....

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.... he made separate original assessments for the assessment years 1962-63 to 1965-66. On appeal by the assessee, the Appellate Assistant Commissioner relied on an order of the Appellate Tribunal in the wealth-tax appeals pertaining to the same trust arrangements and cancelled the assessments for all the years. The Revenue appealed to the Income-tax Appellate Tribunal, but the view taken by the Appellate Assistant Commissioner was upheld by the Appellate Tribunal and the appeals were dismissed. Upon that, the Revenue obtained a reference to the High Court of Andhra Pradesh on the two questions of law set forth earlier for the assessment years 1960-61 to 1965-66. By its judgment dated January 16, 1974, the High Court answered both the questions....

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....ng apportioned between the relatives in the proportion set out, five equal units to constitute the Reserve Fund and the last 3 1/2 equal units to constitute the Family Trust Expenses Account. There is no doubt that separate funds were thus created, even though the division of the original Trust Fund may have been notional. There is also no denying that it is open to a settlor to constitute two or more distinct trusts by a single document. See CIT v. Manilal Dhanji [1962] 44 ITR 876, 886 (SC). The entire position becomes absolutely clear if regard is had to clause 10 of the Trust deed which permits the trustees to have separate trust deeds made and executed in respect of the different funds carved out of the 175 equal units of the corpus of ....